But don’t worry. Whatever I tell you here is strictly within the legal boundaries of your country.

Introducing the Man Who Knew The Secret of Making Big Money

Don’t take my word for it. The guy who claimed “I have ways of making money that you know nothing of” is the richest man in human history.

In today’s dollar terms, this guy is worth more than 700 Billion Dollars. Almost 12 times the richest man today.

I have ways of making money that you know nothing of

Who better to have said this than American business tycoon John D. Rockefeller, founder of American Oil Behemoth: Standard Oil.

And just to convince you that Rockefeller knew what he was talking about, Standard Oil was the largest oil company that ever existed. It controlled more than 95% of the American oil industry at its peak. Then due to court rulings against business monopolies, Standard Oil was broken up into seven smaller companies. And one of the seven “smaller” companies went on to become Exxon Mobil (XOM).

Oh, if you didn’t know, Exxon is the largest enterprise in the world today.

Don’t forget to toss in the other “small” one called Chevron too.

But what on earth was Rockefeller talking about?

Rockefeller’s Secret Love for Dividends

According to official records and his business sense, Rockefeller was referring to dividends.

In 1896, he gave up control of day-to-day operations but held on to his shares of Standard Oil and the dividends. Since he was the majority owner, he ensured that the company paid out more than 2/3 of its profits as dividends.

For the next forty years until his death, he kept collecting dividend checks and enjoyed the steady capital appreciation of the stock.

Rockefeller got Rich off Shares of Standard Oil

He once remarked:

Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.

On the first day of the year, select 10 stocks with the highest dividend yields from the Dow Jones Industrial Average (DJIA). The Dow Jones is made up of 30 stocks.

The table below shows the top 10 stocks (by current dividend yield) from Dogs of the Dow list. You can get the latest list from here.

Rank

Company Name(Part of Dogs of Dow)

Current Dividend Yield (%)

1

AT&T

5.23%

2

Verizon

4.31%

3

Merck

3.52%

4

Intel

3.47%

5

Pfizer

3.40%

6

McDonald’s

3.34%

7

Chevron

3.20%

8

General Electric

3.14%

9

Cisco Systems

3.03%

10

Microsoft

2.99%

Hold these ten Dogs of the Dow for one year

Sell the losers before the year end to take advantage of tax losses

Sell the winners the very next year to pay long term capital gains

Buy the top 10 Dogs of the Dow again and repeat

This strategy has beaten the index over the long run with low risk and you can sleep soundly at night.

Dogs of the Dow Performance

Another Strategy You Can Start Using Today

Here’s another way of profiting off dividends.

This strategy is a combination of Warren Buffett’s policy of “being greedy when others are fearful” and the Dogs of the Dow Theory. To carry out this strategy and meet high returns, follow these steps.

Identify rock solid and dependable businesses. Generally companies that have been part of the DJIA index or Dogs of the Dow for at least 10 years

Based on your findings from step 1, shortlist the candidates that paid decent and reasonable dividends during years of turmoil and downturns

Continue building your cash reserve and wait for the next stock market crash because it will come sooner or later

(This step is painful because it could be years before the market crashes. Your money could be stuck in a low interest yielding account. But don’t worry. You will win in step 4 below.)

But before I get into the analysis, just click on the image below to download my investment scorecard to help you pick stocks like a pro. You’ll also get exclusive content and resources we don’t publish anywhere else.

4. When the markets crash and you are convinced that valuations are low (using indicators like Shiller P/E, P/BV etc), load up the truck on the candidates from step 2

By following this strategy, you pick up great companies at dirt cheap prices. These companies have strong balance sheets to survive the downturn and will reap the benefits of in the next economic up cycle.

Even in a horrible market, people all over the world will continue to line up to buy McDonald’s burgers and fries.

The Upside of this Hybrid Value + Dogs of the Dow Strategy

The best part happens when the economy begins to turn around for the good.

The companies you chose may have stopped their dividends during difficult periods, but when the economy gets better, the dividends will come back or increase.

Ultimately, your dividend yield-on cost becomes very attractive because you bought the stocks at such a cheap price.

Take a look at this example. It’d help you better understand this wealth generation secret.

Actually the dividends Rockefeller received only tells half the story. The other half of the story is that Rockefeller (for the most part) reinvested these dividends back into Standard Oil. Also, as the largest shareholder, he influenced share buy backs at every possible moment from other shareholders but he never sold his.

I have a ? on the tax strategy employed here, which is similar to what you see recommended in other places like the Magic Formula. I understand the part about the tax rate differential between short/long-term capital gains, but over a longer period of time (and assuming a growing portfolio) wouldn’t you accumulate a good bit of ST losses that can’t be used for quite some time. My understanding is that the ST losses cannot off-set the LT gains and while they can be carried over to future years they can only offset $3,000 worth of other income in any single year. It seems like at a certain point you would have accumulated quite a lot of ST losses that you might not have any ability to use for many years. How do you weigh the rate differential vs. the fact that at a certain point you probably can’t use the tax benefit from the ST loss for many years (whereas — assuming you had some winners — you could use it immediately if you converted the loss to a LT loss). It seems like the issue can’t really be reduced to advice that is as simplistic as what is presented here and to really think about this the right way you’d have to make some kind of TVM calculation. Am I missing something?

It was indeed a masterstroke by the tycoon.And the true magic of compounding begins only when one reinvests the dividends/interest back into the principal.In Rockefeller’s case, he also had the privilege of being very powerful, which allowed him to use his influence share buybacks.

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